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Tuesday, 25 September, 2001, 08:44 GMT 09:44 UK
US petrol prices slump
Woman refuelling car
Pump prices have fallen two cents a gallon
By BBC News Online's North America business reporter, David Schepp

Oil refineries in the US are still churning out the same levels of petroleum products despite a drop in demand in wake of the 11 September terrorist attacks.

Fearful of being labelled unpatriotic, producers are maintaining steady production schedules, leading to a glut of jet fuel and heating oil and - potentially - petrol.

That could be a boon for consumers who are looking for ways to cut costs amid what many economists now view as a recession.

Airline-wary Americans may also find the reduced costs of driving to be an alternative to flying.

Petrol prices have fallen an average of two cents a gallon in recent weeks in the face of restraint among refiners to cut production and slack demand among consumers, according to the Lundberg Survey, which tracks petrol prices.

OPEC in a bind

But Americans are not just cancelling air travel, they are keeping out of their cars, too.

That has sent prices tumbling on the world's commodities markets despite efforts by oil-producing nation's to stem haemorrhage.
Petrol prices at a Manhattan petrol station
Petrol prices in Manhattan have remained stable

The Organisation of Petroleum Exporting Countries (Opec) is expected to hold off from cutting production at its meeting on Wednesday, in order to avoid criticism from the West at a sensitive time.

"It's a very delicate time at the moment," said Opec Secretary-General Ali Rodriguez, "but we're all working to maintain price stability."

Crude oil prices have fallen 22% during the last six trading sessions of commodities trading in New York.

"Opec's position has weakened significantly, even for trying to defend $22 [a barrel] of oil," says ABN Amro analyst Nauman Barakat. "Prices could be heading back toward the long-term norm of $18 for Brent and $20 for US crude."

Patriotic production

In the days following the attacks on the World Trade Center and Pentagon, refineries in the US have not cut back production for fear of being viewed as unpatriotic.

It is the potential for negative public reaction and complaints of profiteering that have refineries maintaining production levels.

Within hours after the attacks, some Americans were caught off guard by sudden rises in petrol prices as some station owners reacted to the rising oil prices on world markets.

International oil prices surged as a knee-jerk reaction to the attacks, but later collapsed when it became apparent that supplies from the Middle East were unlikely to be disrupted.

Cheap heating fuel

Prices soared to as high as $7 a gallon in some Midwest markets. States' attorneys generals have vowed to investigate claims of price gouging even as some station owners have refunded money to those customers who felt they had been overcharged.

The surplus has not just lowered the price of jet fuel and petrol.

Americans may now look forward to reduced heating fuel prices this winter, following two consecutive winters of high prices.

Falling jet fuel prices may also help beleaguered US airlines as they try to find ways to cuts costs in the face of falling demand.

See also:

24 Sep 01 | Business
Oil prices sink to year low
17 Sep 01 | Business
Oil reverses post-attack surge
13 Sep 01 | Business
Attacks shake oil and gold prices
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